July 2, 2025 • 16 mins
In this week’s roundup, Bloomberg UK Wealth Editor at Large Merryn Somerset Webb speaks with Money Distilled newsletter author John Stepek about Chancellor Rachel Reeves's tearful appearance in the House of Commons and how that spurred a UK market selloff amid speculation about her future. They also discuss The Times report that AstraZeneca, one of the London market’s top stocks, is thinking of upping sticks and moving to America, and the trend of private equity firms accumulating a record inventory of portfolio companies.
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Speaker 1 (00:02):
Bloomberg Audio Studios, Podcasts, Radio News. Welcome to the Merrin
Talgs Money Market Wrap, where we talk about the biggest
moves in the markets this week and whilst driving them.
I'm Maren Thum's op web editor at Large for Bloomberg
UKA Wealth.
Speaker 2 (00:21):
And I'm Joined Stovik, senior reporters from Bloomberg and author
of the Money to Still newsletter.
Speaker 1 (00:25):
We've got another person for our list, haven't we, John,
The people who we have to refer to only by
putting poor in front of their name, And here we
are poor Rachel Reeves wed They Yeah, we're speaking on Wednesday,
the second, by the way, and we've just been watching,
as we.
Speaker 3 (00:40):
Say, poor Rachel Reeves a bit tearful.
Speaker 1 (00:43):
In parliament and things really not going well for her
pound down yields up Not good, is it, John?
Speaker 2 (00:48):
No, it's very massy and obviously the bike growing to
This is the last night, as in Tuesday evening the
government had to pull its welfare Benefits Bill, which was
meant to save five billion pounds and that was basically
the kind of last hope for Rachel Reeves to come
anywhere close to meeting her fiscal rules, and so by
(01:13):
this morning she was complete sorry, and.
Speaker 1 (01:15):
We should we should say that, we should say to
come anywhere close because it was already a kind of
rubbish bill. But it wasn't saving very much. It wasn't
saving nearly enough. It wasn't a root and branch for reform.
It was just a clip here and a clip there.
It was never good enough. But not even that with
that huge majority, this government couldn't even get that through.
Speaker 2 (01:38):
Yeah, and I mean there's definitely fair criticisms of the bill.
I suspect that the majority of people who voted against
the are not thinking about those particular criticisms. And it
does need a sort of rooten branch reform to make
it work much more cheaply, and also, you know, from
a fair inness point of view. But basically it was like,
(01:58):
it's basically the third kind of budget related to you
turn that they've had, you know, dorees the inheritance tax
sort of semi u turn. There was the winter fuel payments,
which they had completely you turn on. So this is
the third big one that's also the most embarrassing because
I mean, you know, it's been very badly managed. You know,
there were plenty of points of which they could have
pulled this, which would have been less embarrassing, and instead
(02:21):
of being treated to the site of the PM running
around trying to convince the rebels, making all sorts of
promises and then still not getting it over the line.
And that kind of means that very obviously to anyone
with eyes, the chancellor's kind of position is untenable. You know,
(02:42):
the October budget is going to be a big deal,
and the October budget has to stick, it has to
land whatever's in it, and so she can't be the
one to deliver it. So at this point in time
she hasn't you know, resigned, but I mean her time
in that role now surely has to be numbered in
thought these if not oils rather than you know, weeks
(03:02):
on months, is some people maybe thought about a week ago.
Speaker 1 (03:06):
Interesting and given how well useless she's turned out to
be in this role. Although I would say, as we've
said before, I can't really see what anyone could do
in this role. It feels like this age of entitlement
somehow has to just end badly. There's no easy way
out of this. There's nothing that a chancellor can do realistically,
particularly not a labor chancellor. With this group of backbenches,
(03:26):
nothing anyone could realistically do to turn things around at
this point. But nonetheless you'd think they're given that she
hasn't done a great job, but perceived to have done
a great job. Her going because we I'm pretty certain
that she will be going would be kind of good
for guilt markets and kind of you know, maybe good
for the pound.
Speaker 3 (03:45):
Everyone would go, well, there'll be somebody better.
Speaker 1 (03:48):
But the awful thing that the markets are telling us
is that nobody believes that there is somebody better.
Speaker 3 (03:53):
Is that fair?
Speaker 2 (03:54):
Yeah, I mean the problem is and again I mean weirdly,
this is something that isn't is kind of common knowledge
that this is the most if you want to call it,
this right wing configuration possible for the labor government that's
empowered just now. So whoever you get, and whatever configuration
you get, it's going to be more left wing, more
(04:16):
inclined to spend money, more inclined to try and you know,
basically buck the markets, which which won't mark because that's
kind of not how it works. And I guess it's
probably it's not just Rachel Reeves. I don't think markets
are just worried about who will replace Rachel reeves. The
fact is that the Prime minister's authority has been just
(04:37):
irreparably damaged by this. So you are back to the
position where you're basically back to the position that we
were in. Are not far off the position we were
in just after kind of Liz trusts or even journalist trusts,
where markets are losing confidence in the country's ability to
be governed and don't know what's coming next. And the
(04:58):
only reason we haven't had an actual crisis is because
we don't actually don't have the same conditions as we
did under Let's trust, which was you know, the Bank
of England doing rampant kind of q T at the
same time, and also massive leverage having been built up
by pension funds. Basically, there isn't Aldi isn't a problem anymore.
We'd already have kind of blown out by now. I
(05:19):
think if Aldi was still there.
Speaker 3 (05:22):
It's also third world, doesn't it.
Speaker 1 (05:23):
Do you remember that bit when the Labor government first
got in, when everyone said, oh, the grown ups are
in the room, welcome the stability.
Speaker 3 (05:29):
I think we felt for that ourselves a bit. John.
We didn't. We thought they do all kinds of stuff.
We didn't like, but we at least thought they did
it in a stable.
Speaker 1 (05:35):
Environment and that that would somehow be good for the
UK stock market, good for the bond market, et cetera.
And instead of which here we are and all that
muttering about how everything is going to be fine in
the UK.
Speaker 3 (05:46):
The market is going to rhyme. It has it has
the market so well.
Speaker 1 (05:49):
But but but but but Astra Zeneca, Yeah, which you've
written about this week.
Speaker 2 (05:56):
Yeah, And then we feel that that's not actually directly
related to but there certainly wonn't help. So there was
a news story.
Speaker 1 (06:03):
It's absolutely it's not related to it, but it's part
of the whole story of the dysfunction of the UK.
Speaker 3 (06:10):
You know this.
Speaker 1 (06:10):
Of course it's not directly rated to what's happening with
Riche or Reason and k Stamas right now, but it's
related to the fact that people look at our market,
look at our economy, look at everything, and go, this
is a dysfunctional state that should not be valued in
the same way as some other states, which is miserable.
And now we have one of our largest companies, one
(06:32):
of our most well known globally UK companies, Astra Zancre,
and you wrote about it this morning, saying it accounts
for over seven percent, over seven percent of the whole
FOOTZ one hundred and now they're muttering about leaving for
the US, not just muttering it.
Speaker 2 (06:45):
Well, yeah, I mean so this was important the teams,
and it's you know, it's one of those reports that
is confunded by multiple sources, which was donalism speak for
we couldn't get anyone to actually put them the multiple sources,
you know, I mean, yeah, of course the time about
the real question is whether they're talking about loudly enough
to act on it. But the fact that it's been
reported like this, the fact that whenever the rumor came
(07:09):
out yesterday afternoon, Astrozenica's share price kind of jumped by
three percent. I mean, that's a real kind of slap
in the face. The idea that like people in London
are thinking, yeah, it'd be a great idea if you
left and kind of you know, went over the US.
I mean, you can see why they would want to
do it. There's been long standing irritations they're not kind
(07:33):
of the question marks over the regulatory environment in the UK.
Obviously Trump's tariffs are an issue, because that would make
you think I say, maybe it'd be better if we
were listed in the US, and then that might make
things more politically easy over there. But absolutely the other
issue is that the governance here has been so unpredictable
(07:56):
for such a long time now that you know, I mean,
the thing I was thinking about even before this morning happened.
I was thinking, well, somebody had said on Twitter after
this story broke, if I was Rachel Reeves, I'd be
phone in Pascal story or rate now and ask them
what his concerns are. And I was thinking, yeah, but
piscal would be well within his rates to turn that
(08:17):
down to chl and say, yeah, but you know you're
seeing all these things now, how Dan know you're going
to be the customer services person in the job, you know,
by the end of the week. And so it's kind
of is that inconsistency That's another issue.
Speaker 1 (08:31):
But it's also be within his rights to say it's
not like any of this is new. All the problems
with the UK stock working a well known Lord John,
We've been writing and talking about this, but I mean
years at this point, there is no new information here.
A good Chancellor, as we've said from the very beginning
of her being in the job. A good Chancellor would
have been on this immediately, trying to find ways to
(08:53):
improve the environment for the UK store market. And the
obvious way to do that, of course, as we say
over and over, is to get red of stand duty
or that very leaf, bring it somewhere near did global norms.
That would have been the obvious and immediate thing to
do to send a signal to the world that we
are open for business, instead of which we sent signal
after signals saying that actually, do you know what, we're
kind of closed close, actually completely close, totally close, and
(09:15):
then chaos. By the way, we haven't even got a
bandwidth to think about whether you should listen here or not,
because we're kind of busy infighting.
Speaker 2 (09:21):
Yeah, And look, that is the frustration, because I mean,
one of the reasons that we gave the new government
something of the benefit of the doubt is because whenever, yeah,
we did, and whenever they came in, the UK economy
was pointed in the right direction. And before the election
they were talking as if they were kind of pleased
about that, that they take that on board and that
(09:41):
they were going to run with it. And as soon
as they came in they embarked on a punishment budget,
which was basically in order. They kind of scorched earth
and you know, take advantage of the lingering kind of
sense sense that LED's trusts and the Tories high somehow
blowing up the economy and they kind of wanted to
(10:03):
imprint that fiscal responsibility or in the rival party, so
basically settling old scores from field twice. They'll feeling a
bit kind of like annoyed that the Tories have done
the same thing in twenty ten. But instead what they
did is they they screwed themselves, you know they we
could be in a much better position right now if
I hadn't been for the tactics that have been deployed
(10:26):
in the last year. I firmly believe that. And you're right,
should the scrapstamp duty because it costs like three and
a half billion a year. That's all it makes, which is.
Speaker 1 (10:36):
Buttons, and we know what it does to our market. Listen,
while she's still in place, there's one more thing I'd
like to be cross with ritual Raves about. I mean,
it will be nice for a battle and she's gone tomorrow.
The day after end of the week, when I read it,
But anyway, before she goes is one more thing I
want want to talk about, which is private equity. And
one of the things that she has discussed at length
(10:56):
is this idea that a pension funds will be obliged
to put a certain amount of money into UK private
companies or project private projects at least and I don't
know if you saw this, that was an article on
the Wall Street Journal Competition Alert about a letter written
by US politician at least Stefanick asking for an investigation
(11:19):
into Harvard's financial disclosures to their bondholders, and which he's
really talking about in this letter, which we'll put in
the show notes actually a link to it. What she's
really talking about in this letter is asking for a
good look at the percentage of the assets that Harvard
has that are tied up in private equity funds and
the extent to which those funds are overvalued.
Speaker 3 (11:40):
And one of the things she.
Speaker 1 (11:41):
Says is that perhaps just maybe the real, real, realizable
value of those assets is likely far below stated values.
Now I looked at that at around the same time
that I started reading a note sent to us by
Dan from Verdad.
Speaker 3 (11:54):
We've met him on before, excellent podcasts. Go back and
listen to that.
Speaker 1 (11:56):
Of you haven't everybody he's sent around a note saying
that they've had a look comparing ron will want to
complain about their methodology. So again I'll put that link
in the show notes. Go and look at it yourself.
Comparing companies are owned by private equity with SMP five
hundred companies, and here's the data. SMP five hundred companies
pay one percent of their revenues out and interest. They
(12:19):
pay an interest rate with around four percent on their debt.
They have ebitdown margins of twenty five percent, free cashflow
margins of nine percent. For PE companies those numbers of
four percent, eight percent, seven percent, and two percent. So overall,
what we're saying here is that private equity owned companies
are smaller. We know that bit, they're more leveraged, they
(12:40):
pay higher interest rates, and they have much lower margins
than public companies. Yet yet private equity fund management firms
want you to pay more for these companies than you
would for a listed company. Now that would work, That
would be fine to a degree if they will growing very,
(13:01):
very significantly faster than listed companies, right, very significantly fast.
Speaker 3 (13:06):
But guess what.
Speaker 1 (13:09):
The PE companies that come out invert out data are
growing in revenue terms at about the same speed as
S and P five hundred companies, So you haven't even
got the growth. So you look at that and you
don't have to wonder anymore why it's so hard for
private equity companies to exit at the moment. They can't
get rid of these things to listed companies because they
know all this stuff and they certainly can't list them
(13:31):
at the kind of price that they want to list them.
And then, of course, as you and I know that
if you really want to buy small and the liquid companies,
you can do that like way way cheaper with the
added bonus chucked into free of daily market and market
and possibly even from transparency. Yeah, you can buy list
of small counts.
Speaker 3 (13:48):
Why wouldn't you.
Speaker 1 (13:50):
I was talking to Alec Cutler, who we've had again
we've had on the podcast before about this earlier, and
he's like, it's just branding, literally branding. Private equity has
incredibly successful branding campaign and managed to make people believe
that a small, illiquid, slow growing small cap is worth
more when you can't find out anything about it than
(14:12):
it is when you can.
Speaker 2 (14:13):
Well, it's basically you're paying a premium for going behind
the velvet rope. That's it. It's like a members club.
And do you know what I love best about private equity?
It was the way that they managed to turn the
illiquidity issue into a premium by saying that it was
basically a behavioral bonus. So that because you didn't know
(14:36):
what it was worth, and because you couldn't sell any
time you wanted, that meant you should pay more for
private equity because it would stop me from doing something stupid.
I thought that was stagger and that that was the
best sort of like the most amazing prices. Forming rationale
was turning that argument on its head. It was just
spectacular work.
Speaker 1 (14:56):
And maybe, just maybe, just maybe those private pretty companies
will be eventually listed. We will have a pile of
IPOs at the right price. It'll all be very interesting,
our markets will expand again, and we'll be back on track.
That's with no help from Rachel Reeves, but it could
happen that way, right.
Speaker 2 (15:16):
Yeah, So, so what you're saying is on buy an
aim tracker.
Speaker 1 (15:20):
Yeah, But all I would say, John, is it whenever
anybody on any podcast or in any interview starts a
sentence with well, what you're saying is almost always that
person is not saying that.
Speaker 3 (15:34):
That's my experience.
Speaker 2 (15:37):
That's that's the closest thing a caveat you're never going
to get in this podcast.
Speaker 3 (15:42):
That's that's good, It really is anyway.
Speaker 1 (15:46):
Anyway, Okay, all eyes on Rachel Reeves and we'll be
back to talk about this.
Speaker 3 (15:50):
More next week.
Speaker 2 (15:51):
Thanks John, Thanks me.
Speaker 1 (15:58):
Thanks for listening to this week's Marin Talks Money Debrief.
If you like us show, rate, review, and subscribe wherever
you listen to podcasts. Also be sure to follow me
and John on ex or Twitter. We will be watching
UK politics very closely over the next few days. I'm
at marinsw and John is John Underscore Stepic.
Speaker 3 (16:13):
John also needs new followers.
Speaker 1 (16:15):
Please follow him. He's very far behind me on followers.
I've just sat sixty thousand ms.
Speaker 3 (16:19):
So winning.
Speaker 1 (16:20):
John is still languishing around twenty. Help him get to
my level. This episode was produced by Summersadi and Tala Almadi.
Production support and sound designed by Blake Maple's Questions and
comments on this show and all our shows are always welcome.
Our show email is Marron Money at Bloomberg dot Now,
Bloomberg Audio Studios, Podcasts, Radio News. Welcome to the Merrin
Talgs Money Market Wrap, where we talk about the biggest
moves in the markets this week and whilst driving them.
I'm Maren Thum's op web editor at Large for Bloomberg
UKA Wealth.
Speaker 2 (00:21):
And I'm Joined Stovik, senior reporters from Bloomberg and author
of the Money to Still newsletter.
Speaker 1 (00:25):
We've got another person for our list, haven't we, John,
The people who we have to refer to only by
putting poor in front of their name, And here we
are poor Rachel Reeves wed They Yeah, we're speaking on Wednesday,
the second, by the way, and we've just been watching,
as we.
Speaker 3 (00:40):
Say, poor Rachel Reeves a bit tearful.
Speaker 1 (00:43):
In parliament and things really not going well for her
pound down yields up Not good, is it, John?
Speaker 2 (00:48):
No, it's very massy and obviously the bike growing to
This is the last night, as in Tuesday evening the
government had to pull its welfare Benefits Bill, which was
meant to save five billion pounds and that was basically
the kind of last hope for Rachel Reeves to come
anywhere close to meeting her fiscal rules, and so by
(01:13):
this morning she was complete sorry, and.
Speaker 1 (01:15):
We should we should say that, we should say to
come anywhere close because it was already a kind of
rubbish bill. But it wasn't saving very much. It wasn't
saving nearly enough. It wasn't a root and branch for reform.
It was just a clip here and a clip there.
It was never good enough. But not even that with
that huge majority, this government couldn't even get that through.
Speaker 2 (01:38):
Yeah, and I mean there's definitely fair criticisms of the bill.
I suspect that the majority of people who voted against
the are not thinking about those particular criticisms. And it
does need a sort of rooten branch reform to make
it work much more cheaply, and also, you know, from
a fair inness point of view. But basically it was like,
(01:58):
it's basically the third kind of budget related to you
turn that they've had, you know, dorees the inheritance tax
sort of semi u turn. There was the winter fuel payments,
which they had completely you turn on. So this is
the third big one that's also the most embarrassing because
I mean, you know, it's been very badly managed. You know,
there were plenty of points of which they could have
pulled this, which would have been less embarrassing, and instead
(02:21):
of being treated to the site of the PM running
around trying to convince the rebels, making all sorts of
promises and then still not getting it over the line.
And that kind of means that very obviously to anyone
with eyes, the chancellor's kind of position is untenable. You know,
(02:42):
the October budget is going to be a big deal,
and the October budget has to stick, it has to
land whatever's in it, and so she can't be the
one to deliver it. So at this point in time
she hasn't you know, resigned, but I mean her time
in that role now surely has to be numbered in
thought these if not oils rather than you know, weeks
(03:02):
on months, is some people maybe thought about a week ago.
Speaker 1 (03:06):
Interesting and given how well useless she's turned out to
be in this role. Although I would say, as we've
said before, I can't really see what anyone could do
in this role. It feels like this age of entitlement
somehow has to just end badly. There's no easy way
out of this. There's nothing that a chancellor can do realistically,
particularly not a labor chancellor. With this group of backbenches,
(03:26):
nothing anyone could realistically do to turn things around at
this point. But nonetheless you'd think they're given that she
hasn't done a great job, but perceived to have done
a great job. Her going because we I'm pretty certain
that she will be going would be kind of good
for guilt markets and kind of you know, maybe good
for the pound.
Speaker 3 (03:45):
Everyone would go, well, there'll be somebody better.
Speaker 1 (03:48):
But the awful thing that the markets are telling us
is that nobody believes that there is somebody better.
Speaker 3 (03:53):
Is that fair?
Speaker 2 (03:54):
Yeah, I mean the problem is and again I mean weirdly,
this is something that isn't is kind of common knowledge
that this is the most if you want to call it,
this right wing configuration possible for the labor government that's
empowered just now. So whoever you get, and whatever configuration
you get, it's going to be more left wing, more
(04:16):
inclined to spend money, more inclined to try and you know,
basically buck the markets, which which won't mark because that's
kind of not how it works. And I guess it's
probably it's not just Rachel Reeves. I don't think markets
are just worried about who will replace Rachel reeves. The
fact is that the Prime minister's authority has been just
(04:37):
irreparably damaged by this. So you are back to the
position where you're basically back to the position that we
were in. Are not far off the position we were
in just after kind of Liz trusts or even journalist trusts,
where markets are losing confidence in the country's ability to
be governed and don't know what's coming next. And the
(04:58):
only reason we haven't had an actual crisis is because
we don't actually don't have the same conditions as we
did under Let's trust, which was you know, the Bank
of England doing rampant kind of q T at the
same time, and also massive leverage having been built up
by pension funds. Basically, there isn't Aldi isn't a problem anymore.
We'd already have kind of blown out by now. I
(05:19):
think if Aldi was still there.
Speaker 3 (05:22):
It's also third world, doesn't it.
Speaker 1 (05:23):
Do you remember that bit when the Labor government first
got in, when everyone said, oh, the grown ups are
in the room, welcome the stability.
Speaker 3 (05:29):
I think we felt for that ourselves a bit. John.
We didn't. We thought they do all kinds of stuff.
We didn't like, but we at least thought they did
it in a stable.
Speaker 1 (05:35):
Environment and that that would somehow be good for the
UK stock market, good for the bond market, et cetera.
And instead of which here we are and all that
muttering about how everything is going to be fine in
the UK.
Speaker 3 (05:46):
The market is going to rhyme. It has it has
the market so well.
Speaker 1 (05:49):
But but but but but Astra Zeneca, Yeah, which you've
written about this week.
Speaker 2 (05:56):
Yeah, And then we feel that that's not actually directly
related to but there certainly wonn't help. So there was
a news story.
Speaker 1 (06:03):
It's absolutely it's not related to it, but it's part
of the whole story of the dysfunction of the UK.
Speaker 3 (06:10):
You know this.
Speaker 1 (06:10):
Of course it's not directly rated to what's happening with
Riche or Reason and k Stamas right now, but it's
related to the fact that people look at our market,
look at our economy, look at everything, and go, this
is a dysfunctional state that should not be valued in
the same way as some other states, which is miserable.
And now we have one of our largest companies, one
(06:32):
of our most well known globally UK companies, Astra Zancre,
and you wrote about it this morning, saying it accounts
for over seven percent, over seven percent of the whole
FOOTZ one hundred and now they're muttering about leaving for
the US, not just muttering it.
Speaker 2 (06:45):
Well, yeah, I mean so this was important the teams,
and it's you know, it's one of those reports that
is confunded by multiple sources, which was donalism speak for
we couldn't get anyone to actually put them the multiple sources,
you know, I mean, yeah, of course the time about
the real question is whether they're talking about loudly enough
to act on it. But the fact that it's been
reported like this, the fact that whenever the rumor came
(07:09):
out yesterday afternoon, Astrozenica's share price kind of jumped by
three percent. I mean, that's a real kind of slap
in the face. The idea that like people in London
are thinking, yeah, it'd be a great idea if you
left and kind of you know, went over the US.
I mean, you can see why they would want to
do it. There's been long standing irritations they're not kind
(07:33):
of the question marks over the regulatory environment in the UK.
Obviously Trump's tariffs are an issue, because that would make
you think I say, maybe it'd be better if we
were listed in the US, and then that might make
things more politically easy over there. But absolutely the other
issue is that the governance here has been so unpredictable
(07:56):
for such a long time now that you know, I mean,
the thing I was thinking about even before this morning happened.
I was thinking, well, somebody had said on Twitter after
this story broke, if I was Rachel Reeves, I'd be
phone in Pascal story or rate now and ask them
what his concerns are. And I was thinking, yeah, but
piscal would be well within his rates to turn that
(08:17):
down to chl and say, yeah, but you know you're
seeing all these things now, how Dan know you're going
to be the customer services person in the job, you know,
by the end of the week. And so it's kind
of is that inconsistency That's another issue.
Speaker 1 (08:31):
But it's also be within his rights to say it's
not like any of this is new. All the problems
with the UK stock working a well known Lord John,
We've been writing and talking about this, but I mean
years at this point, there is no new information here.
A good Chancellor, as we've said from the very beginning
of her being in the job. A good Chancellor would
have been on this immediately, trying to find ways to
(08:53):
improve the environment for the UK store market. And the
obvious way to do that, of course, as we say
over and over, is to get red of stand duty
or that very leaf, bring it somewhere near did global norms.
That would have been the obvious and immediate thing to
do to send a signal to the world that we
are open for business, instead of which we sent signal
after signals saying that actually, do you know what, we're
kind of closed close, actually completely close, totally close, and
(09:15):
then chaos. By the way, we haven't even got a
bandwidth to think about whether you should listen here or not,
because we're kind of busy infighting.
Speaker 2 (09:21):
Yeah, And look, that is the frustration, because I mean,
one of the reasons that we gave the new government
something of the benefit of the doubt is because whenever, yeah,
we did, and whenever they came in, the UK economy
was pointed in the right direction. And before the election
they were talking as if they were kind of pleased
about that, that they take that on board and that
(09:41):
they were going to run with it. And as soon
as they came in they embarked on a punishment budget,
which was basically in order. They kind of scorched earth
and you know, take advantage of the lingering kind of
sense sense that LED's trusts and the Tories high somehow
blowing up the economy and they kind of wanted to
(10:03):
imprint that fiscal responsibility or in the rival party, so
basically settling old scores from field twice. They'll feeling a
bit kind of like annoyed that the Tories have done
the same thing in twenty ten. But instead what they
did is they they screwed themselves, you know they we
could be in a much better position right now if
I hadn't been for the tactics that have been deployed
(10:26):
in the last year. I firmly believe that. And you're right,
should the scrapstamp duty because it costs like three and
a half billion a year. That's all it makes, which is.
Speaker 1 (10:36):
Buttons, and we know what it does to our market. Listen,
while she's still in place, there's one more thing I'd
like to be cross with ritual Raves about. I mean,
it will be nice for a battle and she's gone tomorrow.
The day after end of the week, when I read it,
But anyway, before she goes is one more thing I
want want to talk about, which is private equity. And
one of the things that she has discussed at length
(10:56):
is this idea that a pension funds will be obliged
to put a certain amount of money into UK private
companies or project private projects at least and I don't
know if you saw this, that was an article on
the Wall Street Journal Competition Alert about a letter written
by US politician at least Stefanick asking for an investigation
(11:19):
into Harvard's financial disclosures to their bondholders, and which he's
really talking about in this letter, which we'll put in
the show notes actually a link to it. What she's
really talking about in this letter is asking for a
good look at the percentage of the assets that Harvard
has that are tied up in private equity funds and
the extent to which those funds are overvalued.
Speaker 3 (11:40):
And one of the things she.
Speaker 1 (11:41):
Says is that perhaps just maybe the real, real, realizable
value of those assets is likely far below stated values.
Now I looked at that at around the same time
that I started reading a note sent to us by
Dan from Verdad.
Speaker 3 (11:54):
We've met him on before, excellent podcasts. Go back and
listen to that.
Speaker 1 (11:56):
Of you haven't everybody he's sent around a note saying
that they've had a look comparing ron will want to
complain about their methodology. So again I'll put that link
in the show notes. Go and look at it yourself.
Comparing companies are owned by private equity with SMP five
hundred companies, and here's the data. SMP five hundred companies
pay one percent of their revenues out and interest. They
(12:19):
pay an interest rate with around four percent on their debt.
They have ebitdown margins of twenty five percent, free cashflow
margins of nine percent. For PE companies those numbers of
four percent, eight percent, seven percent, and two percent. So overall,
what we're saying here is that private equity owned companies
are smaller. We know that bit, they're more leveraged, they
(12:40):
pay higher interest rates, and they have much lower margins
than public companies. Yet yet private equity fund management firms
want you to pay more for these companies than you
would for a listed company. Now that would work, That
would be fine to a degree if they will growing very,
(13:01):
very significantly faster than listed companies, right, very significantly fast.
Speaker 3 (13:06):
But guess what.
Speaker 1 (13:09):
The PE companies that come out invert out data are
growing in revenue terms at about the same speed as
S and P five hundred companies, So you haven't even
got the growth. So you look at that and you
don't have to wonder anymore why it's so hard for
private equity companies to exit at the moment. They can't
get rid of these things to listed companies because they
know all this stuff and they certainly can't list them
(13:31):
at the kind of price that they want to list them.
And then, of course, as you and I know that
if you really want to buy small and the liquid companies,
you can do that like way way cheaper with the
added bonus chucked into free of daily market and market
and possibly even from transparency. Yeah, you can buy list
of small counts.
Speaker 3 (13:48):
Why wouldn't you.
Speaker 1 (13:50):
I was talking to Alec Cutler, who we've had again
we've had on the podcast before about this earlier, and
he's like, it's just branding, literally branding. Private equity has
incredibly successful branding campaign and managed to make people believe
that a small, illiquid, slow growing small cap is worth
more when you can't find out anything about it than
(14:12):
it is when you can.
Speaker 2 (14:13):
Well, it's basically you're paying a premium for going behind
the velvet rope. That's it. It's like a members club.
And do you know what I love best about private equity?
It was the way that they managed to turn the
illiquidity issue into a premium by saying that it was
basically a behavioral bonus. So that because you didn't know
(14:36):
what it was worth, and because you couldn't sell any
time you wanted, that meant you should pay more for
private equity because it would stop me from doing something stupid.
I thought that was stagger and that that was the
best sort of like the most amazing prices. Forming rationale
was turning that argument on its head. It was just
spectacular work.
Speaker 1 (14:56):
And maybe, just maybe, just maybe those private pretty companies
will be eventually listed. We will have a pile of
IPOs at the right price. It'll all be very interesting,
our markets will expand again, and we'll be back on track.
That's with no help from Rachel Reeves, but it could
happen that way, right.
Speaker 2 (15:16):
Yeah, So, so what you're saying is on buy an
aim tracker.
Speaker 1 (15:20):
Yeah, But all I would say, John, is it whenever
anybody on any podcast or in any interview starts a
sentence with well, what you're saying is almost always that
person is not saying that.
Speaker 3 (15:34):
That's my experience.
Speaker 2 (15:37):
That's that's the closest thing a caveat you're never going
to get in this podcast.
Speaker 3 (15:42):
That's that's good, It really is anyway.
Speaker 1 (15:46):
Anyway, Okay, all eyes on Rachel Reeves and we'll be
back to talk about this.
Speaker 3 (15:50):
More next week.
Speaker 2 (15:51):
Thanks John, Thanks me.
Speaker 1 (15:58):
Thanks for listening to this week's Marin Talks Money Debrief.
If you like us show, rate, review, and subscribe wherever
you listen to podcasts. Also be sure to follow me
and John on ex or Twitter. We will be watching
UK politics very closely over the next few days. I'm
at marinsw and John is John Underscore Stepic.
Speaker 3 (16:13):
John also needs new followers.
Speaker 1 (16:15):
Please follow him. He's very far behind me on followers.
I've just sat sixty thousand ms.
Speaker 3 (16:19):
So winning.
Speaker 1 (16:20):
John is still languishing around twenty. Help him get to
my level. This episode was produced by Summersadi and Tala Almadi.
Production support and sound designed by Blake Maple's Questions and
comments on this show and all our shows are always welcome.
Our show email is Marron Money at Bloomberg dot Now,
Host
Merryn Somerset Webb
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